Correlation Between ISA Holdings and Lesaka Technologies

Can any of the company-specific risk be diversified away by investing in both ISA Holdings and Lesaka Technologies at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining ISA Holdings and Lesaka Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ISA Holdings and Lesaka Technologies, you can compare the effects of market volatilities on ISA Holdings and Lesaka Technologies and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in ISA Holdings with a short position of Lesaka Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of ISA Holdings and Lesaka Technologies.

Diversification Opportunities for ISA Holdings and Lesaka Technologies

0.04

Correlation Coefficient

ISA Holdings  Lesaka Technologies

Significant diversification

The 3 months correlation between ISA and Lesaka is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding ISA Holdings and Lesaka Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lesaka Technologies and ISA Holdings is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on ISA Holdings are associated (or correlated) with Lesaka Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lesaka Technologies has no effect on the direction of ISA Holdings i.e., ISA Holdings and Lesaka Technologies go up and down completely randomly.

Pair Corralation between ISA Holdings and Lesaka Technologies

Assuming the 90 days trading horizon ISA Holdings is expected to generate 0.9 times more return on investment than Lesaka Technologies. However, ISA Holdings is 1.11 times less risky than Lesaka Technologies. It trades about 0.07 of its potential returns per unit of risk. Lesaka Technologies is currently generating about 0.01 per unit of risk. If you would invest  18,400  in ISA Holdings on December 29, 2024 and sell it today you would earn a total of  1,400  from holding ISA Holdings or generate 7.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

ISA Holdings  vs.  Lesaka Technologies

ISA Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ISA Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, ISA Holdings may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Lesaka Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lesaka Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Lesaka Technologies is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ISA Holdings and Lesaka Technologies

The main advantage of trading using opposite ISA Holdings and Lesaka Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ISA Holdings position performs unexpectedly, Lesaka Technologies can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Lesaka Technologies will offset losses from the drop in Lesaka Technologies' long position.

The idea behind ISA Holdings and Lesaka Technologies pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.